Gifts out of Surplus Income- School Fee Savings

mrszippyriver

My father is trying to assist with the preparation of school fees for our child in the future. He has a steady income and could support us with regular 'gift out of surplus income'. However, our child doesn't start secondary school for another 4 years, as such he'd like to pay into a savings account so that this can be put towards future school fees. There's a chance he might not reach the date of them starting school but he'd like to try and contribute while he is with us.

If he was to donate a regular payment to my ISA as the parent on a monthly or yearly basis, should the ISA be named 'School Fees' to assist with the IHT403 forms etc? Is this a viable option?

He is trying to keep his estate down while helping his family. I'm aware he could leave an expression of wish in his Will however he has suggested it comes out of his income now. Any advice would be appreciated. 

HappyHarry

As long as his executors can show that this is surplus income, it doesn't matter whether it goes direct to school fees or in an ISA in your name.

Have a look through the form IHT403 and you will see what the executor will require.

Keep_pedalling

It does not matter where the money is deposited, what is need is for him to keep records of both gifting and his expenditure otherwise his executor will have difficulty in getting all the figures to be able to claim it. 

Take a look at IHT 403 to see what is needed.

Is his estate already in IHT territory?

phlebas192

mrszippyriver said:

If he was to donate a regular payment to my ISA as the parent on a monthly or yearly basis, should the ISA be named 'School Fees' to assist with the IHT403 forms etc? Is this a viable option?

Just on this specific point, your father cannot make any payment into your ISA, only you can do that. He would have to gift you the money and then you could put it into an ISA in your name (or not, it's your money once he's given it to you).

silvercar

phlebas192 said:

mrszippyriver said:

If he was to donate a regular payment to my ISA as the parent on a monthly or yearly basis, should the ISA be named 'School Fees' to assist with the IHT403 forms etc? Is this a viable option?

Just on this specific point, your father cannot make any payment into your ISA, only you can do that. He would have to gift you the money and then you could put it into an ISA in your name (or not, it's your money once he's given it to you).

Why not? I've paid money directly into my adult children's ISAs.

phlebas192

silvercar said:

phlebas192 said:

mrszippyriver said:

If he was to donate a regular payment to my ISA as the parent on a monthly or yearly basis, should the ISA be named 'School Fees' to assist with the IHT403 forms etc? Is this a viable option?

Just on this specific point, your father cannot make any payment into your ISA, only you can do that. He would have to gift you the money and then you could put it into an ISA in your name (or not, it's your money once he's given it to you).

Why not? I've paid money directly into my adult children's ISAs.

Payments have to be your own cash. See eg https://www.ii.co.uk/ii-accounts/isa/faqs/can-someone-else-pay-into-my-isa 

That said, I've found this discussion from from 2011 https://forums.moneysavingexpert.com/discussion/3241596/can-someone-else-pay-into-my-isa/p1 and the HMRC rules that dunstonh refers to is at https://www.gov.uk/guidance/manage-isa-subscriptions-for-your-investors. The relevent part is:

"Cash subscriptions from third parties can be accepted without question unless the ISA manager holds information that shows that the cash does not belong to the investor."

which does imply that the ii page is wrong. But, as the 2011 thread discusses, it can be open to interpretation when a gift becomes "your own cash" and whether it refers to physical cash only.

Probably something that could only be determined definitively by a high court ruling although I guess it is unlikely that there ever will be one. To be safe, it might be worth dropping the recipient a dated note along the lines of "I gift to you £x and will pay it directly into your ISA" which makes it clear that it is their money before the payment is made.

NedS

On an administrative note, my online ISA provider will not take payments from a bank account that is not in my name, so I cannot pay into my wife's ISA and she cannot pay into mine. We must each pay into our own ISAs from our own respective bank accounts, having transferred any relevant funds there first.

cherry76

I opened a junior isa for my son for past 12 yrs funded by my mum. She transferred the money into my bank account every year.